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Companies that vanished: WorldCom

This post is part of a series on some of the most memorable companies that have disappeared.

Ah WorldCom. Aside from its storied history as one of the world's biggest accounting frauds, I remember it as my first cell phone company. My husband bought me a WorldCom phone as a gift and it turned out to not only have terrible service, but ridiculous billing practices, and we ended up paying to get out of the contract as I recall. I remember thinking that there was something really wrong with that company and later wishing I had pursued it as an investigative story, since I was then a writer at BusinessWeek Online and WorldCom was a hot stock.

But no, I never got onto such a story. In fact, I followed WorldCom's stock with interest since I had picked it in an office stock-picking contest years earlier and felt some satisfaction at its meteoric rise through the 1990s (even though I never actually owned the shares; it was just part of a fantasy portfolio).

But here's the WorldCom history that is worth remembering now: WorldCom started as Long Distance Discount Services (LDDS) in 1983. It changed its name to WorldCom in 1995. A series of mega-mergers transformed the company, culminating in its $40 billion deal for MCI. It was rechristened MCI WorldCom in 1998, the second largest long-distance calling company. The following year, just as it announced a deal with Sprint (now Sprint Nextel (NYSE: S)) that never came to fruition, the telecom industry started a prolonged downturn.

As WorldCom merged itself into hugeness, its charismatic founder and CEO, Bernard Ebbers (known as the telecom cowboy), gained great riches and notoriety. But as the company flailed in the telecom downturn, management resorted to accounting tricks to try to keep the stock afloat. By 2002, an elaborate accounting fraud was revealed, WorldCom admitted to $3.85 billion in misstatements and filed for bankruptcy. The accounting fraud tally ultimately grew to a shocking $11 billion.

Ebbers was convicted of securities fraud and conspiracy in 2005 and is currently serving a 25-year prison sentence in Louisiana.

In bankruptcy, WorldCom changed its name back to MCI, reorganized and began an effort to pay back creditors. Bondholders got about 36 cents on the dollar. The once high-flying stock became worthless. In 2006 Verizon Communications (NYSE: VZ) purchased MCI, and most of its remaining operations became what is now called Verizon Business. There, is where the WorldCom story ends.

Let us know in the comments what you remember about WorldCom. And be sure to check out other Companies That Have Vanished.

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Last updated: November 22, 2008: 08:44 AM

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